U.S. Plans to File Unfair-Trade Case

SANTA BARBARA — The Reagan Administration, seeking a political strategy to blunt criticism of its decision not to curb footwear imports, within a few weeks will take the unprecedented step of initiating at least one unfair trade practices case, a top Administration official predicted Thursday.

The case would be filed under Section 301 of the Trade Act of 1974, which spells out procedures under which the United States may retaliate against governments that engage in unfair trade practices such as "dumping" goods in the United States at less than their production cost or subsidizing their own exporters.

"I feel certain they will initiate at least one 301 case, and in all probability others," said the official, who spoke on the condition that he not be identified. He noted that such cases in the past always have been initiated by the injured industry, not by the government.

The official did not specify what products are likely to be involved in the case but said the Administration is poised to initiate action with respect to at least one industry.

With congressional anger building over a wave of imports that is costing thousands of U.S. jobs a month, Reagan is likely to face a spate of protectionist bills this fall pitting his free-trade philosophy against public demand for greater controls on imports.

His decision Wednesday not to allow quotas on imported non-rubber shoes, which now command 76% of the domestic market, has generated even more friction between the White House and Congress. Thus, the official said, it is crucial that the White House come forward with a clear trade strategy within the next two weeks.

The footwear decision had been based upon another section of the law, under which import-battered industries may ask for relief regardless of whether they have suffered from unfair trade practices.

By focusing on the unfair trade section of the law, the Administration could move to reduce a record trade deficit without violating its own free-trade philosophy. Reagan often has insisted that free trade must also be fair trade.

Perhaps more importantly, the unfair-trade section of the law also gives the Administration more control over individual cases. This is because such cases are filed with the President's special trade representative rather than the independent U.S. International Trade Commission.

Unlike actions taken under other sections, unfair trade cases also emphasize negotiations with U.S. trading partners. If such talks prove fruitless, the Administration may retaliate with quotas or higher tariffs.

The official said a cabinet-level working group also is considering other suggestions, including pursuing a case brought by the machine-tool industry. That industry, filing under Section 232 of the law, argued that it must be protected or the United States will lose the ability to produce a product that is important to national security.

Taking up the cause of machine-tool makers would carry the political advantage of striking out against imports from Japan and other Far Eastern countries, which are major contributors to a trade deficit expected to reach a record $150 billion this year.